Thursday, August 25, 2011

Taibbi on the "Obama vs. Schneiderman" affair

When last we met, the topic was the Obama administration's push to scuttle NY Attorney General Eric Schneiderman's efforts to clean up the banks. Here comes Matt Taibbi with his usual blockbuster reportage on Obama's dirty deal:

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.

This deal will also submarine efforts by both defrauded investors in MBS and unfairly foreclosed-upon homeowners and borrowers to obtain any kind of relief in the civil court system.

The dirty deal seeks a $20 billion penalty. Peanuts. If the banks coughed up $700 billion, and if the money were used to help people struggling to pay off their mortgages, a lot of people would suddenly find that their monthly house notes have become affordable. In short: A lot of people would keep their homes.

Libertarians will argue that this solution would constitute "free houses" for the working class. Bullshit. The people in those houses would still be paying current fair market value for their property. Always remember that the great Wall Street investment firms drove up prices by practicing pure sleaze -- and the sleaziest move of all was the packaging of subprime mortgages as AAA-rated investment instruments.

The banks lent money to corrupt companies like Countrywide, who made masses of bad loans and immediately sold them back to the banks.

The banks in turn hid the crappiness of these loans via certain poorly-understood nuances in the securitization process – this is almost certainly where Scheniderman’s investigators are doing their digging – before hawking the resultant securities as AAA-rated gold to fools in places like the Florida state pension fund.

They did this for years, systematically, working hand in hand in a wink-nudge arrangement with clearly criminal enterprises like Countrywide and New Century.

For more details, read Taibbi's invaluable book Griftopia.

Under Obama's deal, the defrauded investors won't even be able to sue in civil court. The big question is: Why on earth is Obama doing this ghastly thing? Taibbi:

My theory is that the Obama administration is trying to secure its 2012 campaign war chest with this settlement deal. If Barry can make this foreclosure thing go away for the banks, you can bet he’ll win the contributions battle against the Republicans next summer.

This is the one area where I must disagree with Taibbi. The Wall Streeters hate Obama with a deep and abiding passion. A lot of big bank money went into the tea party movement, as this important piece by Zach Carter makes clear.

Despite all the Tea Party rhetoric against big, bad bailouts, the leading candidates have had no problem accepting millions of dollars from Big Finance to further their electoral prospects. Every single candidate has taken money from what the Center for Responsive Politics characterizes as the FIRE lobby—finance, insurance and real estate—a category that includes all of the big financial interests who benefited from the Wall Street bailout.

Pat Toomey, Jim DeMint and Rand Paul have all talked the talk vis-a-vis the great Wall Street bailout, but they all got huge funding from the great investment banks.

Washington Tea Partier Dino Rossi has vowed to appeal the financial reform bill that Congress passed this year, and he has $750,253 worth of reasons to make such a pledge.

Rossi's hardly the only one. If you tiptoe through the tea party websites, you'll see lots of propaganda against that reform bill. They talk about it as if it were written by Lenin. In fact, that package offers very little in the way of actual reform. Alas, Lloyd Blankfein's wrists are so dainty that they cannot tolerate even the lightest of slaps.

How did we get from 2008 -- when everyone understood that unregulated banks screwed over the planet -- to where we are today? A staggering amount of people now believe that the collapse of 2008 was caused by too much regulation. Yes, I know: That's like saying guillotines make people taller. Nevertheless, that's the scenario that many of your fellow citizens have come to accept.

Everything comes down to propaganda. We're inundated with the stuff, and the average citizen never tires of believing codswallop. If it suited their interests to do so, the propagandists could make Joe Sixpack believe that running headlong into a brick wall cures headaches.

So here's where we're at: The Wall Streeters funded tea party candidates who based their populist campaigns on denunciations of the bank bailout. Meanwhile, Obama -- who supported the bailout, and who is working against Scheiderman -- is despised by those same Wall Streeters because he once said some mildly derogatory things about them in a teevee interview.

I sent Eric Schneiderman's office an email to thank him and his staff for the work they're doing in behalf of the American public. God knows, we need honest brokers serving the public. One is better than none.

As for the Tea Party zealots? Hey, propaganda works that's why we're awash in it. Take a look at the 'Texas Miracle' as a prime example. People eat this stuff up--oh goodie, a cowboy to the rescue. Lift the edges up on all the hype and any 'reasonable' person can see that Perry et al are first class shiesters, preaching one thing, doing the opposite.

Obama? He's as big a fraud as the rest. This battle with Schneiderman is a case in point. But Schneiderman's investigations must be making people nervous. I read that Lloyd Blankfein has hired a defense attorney. Should get interesting!

Peggy Sue

posted by Anonymous : 11:09 AM

The entire country clinically insane? That's what you get when the fourth estate becomes a propaganda tool of the powers that be rather than an effective means of honest debate and discussion.

I see the two most 'root' causes of our sad state of affairs as 1). Privately funded elections and 2). News organizations operated primarily as 'for profit' ventures.

The first erodes the principle of elected officials as representatives of the people (as opposed to their donors) and the second destroys the informational of the populace, which in turns perverts their ability to arrive at valid political and economic views.

I believe the most crucial issue for any insurgent political movement is to push for 100% publicly funded elections, perhaps with an eye towards ending revolving-door employment opportunities between government and business.

The way things are going, though, I find myself increasingly sympathetic with Ian Welsh's pessimism on the future of the US (and Western) political and economic future. A hundred years ago we may have been able to endure a libertarian-induced collapse followed by a liberal/left corrective, but issues like global warming, energy and water scarcity, food shortages, etc seem like they're going to become intractable problems just at the time we're least capable of addressing them rationally. If pressed, I'd say the smart money is on "We're fucked."

When I was younger, part of me thought that witnessing US civilization's collapse would be perversely entertaining. Now that the prospect seems increasingly real, it's simply terrifying.

posted by Hoarseface : 1:34 PM

This is the one area where I must disagree with Taibbi. The Wall Streeters hate Obama with a deep and abiding passion. A lot of big bank money went into the tea party movement,

I disagree - I don't think the plutocracy's backing of the Tea Party has anything to do with "hating Obama". They're perfectly content to co-opt the Left by backing Obama, while they co-opt the Right by backing the Tea Party. It's all about monopolizing shelf space in the great marketplace of ideas. No matter what your political persuasion, they have a bought-and-paid-for candidate product for you.

Schneiderman is a tougher, more politically savvy version of Spitzer, coming out of the rough-and-tumble of West Side Manhattan politics that's easily as ferocious as the Chicago or old school Boston equivalents. Spitzer worked through the various back alleys of law enforcement and real estate with no burnishing thru local politics. Also Schneiderman has a better team in place than Spitzer did, both on the hard tack prosecutorial side and his political team.

But anyone is vulnerable, particularly when Kroll Associates can let loose an investigative dogs of war assault full of former spooks and federal agents, as Spitzer learned. Clinton, Spitzer and Weiner certainly did self-destructive things; but all were at least as much set-up as politically suicidal.